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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






2. AVC = TVC/Q






3. The ability to set the price above the perfectly competitive level






4. A firm that has market power in the factor market (a wage-setter)






5. The price of a good measured in units of currency






6. Ed < 1






7. When firms focus their resources on production of goods for which they have comparative advantage






8. Entry (or exit) of firms does not shift the cost curves of firms in the industry






9. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






10. The imbalance between limited productive resources and unlimited human wants






11. Exists at the point where the quantity supplied equals the quantity demanded






12. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






13. Ei = (%dQd good X)/(%d Income)






14. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






15. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






16. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






17. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






18. Entry of new firms shifts the cost curves for all firms upward






19. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






20. Exists if a producer can produce a good at lower opportunity cost than all other producers






21. A good for which higher income decreases demand






22. Models where firms are competitive rivals seeking to gain at the expense of their rivals






23. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






24. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






25. The most desirable alternative given up as the result of a decision






26. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






27. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






28. Ed > 1 - meaning consumers are price sensitive






29. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






30. The difference between total revenue and total explicit and implicit costs






31. Exists if a producer can produce more of a good than all other producers






32. All firms maximize profit by producing where MR = MC






33. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






34. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






35. MUx / Px = MUy/Py or MUx/MUy = Px/Py






36. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






37. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






38. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






39. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






40. ATC = TC/Q = AFC + AVC






41. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






42. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






43. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






44. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






45. Ed = 1






46. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






47. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






48. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






49. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






50. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF